| (a) Definition. A default charge is the additional charge for a late payment on a contract. The term default charge is synonymous with the term delinquency charge as contained in Texas Finance Code, §348.107. (b) Precomputed regular payment contract using sum of the periodic balances method. For a regular payment contract employing the add-on method and the refunding method of the sum of the periodic balances, a holder may assess, charge, and collect a default charge not to exceed 5% of the scheduled payment or a default charge on the past due amount computed at the maximum daily rate authorized for the contract from the due date to the date that the past due amount is paid. (c) Scheduled installment earnings method. For a regular or an irregular payment contract employing the scheduled installment earnings method, a holder may assess, charge, and collect a default charge not to exceed 5% of the scheduled payment and a default charge on the past due amount computed at the maximum daily rate authorized for the contract from the due date to the date that the past due amount is paid. (d) True daily earnings method. For a regular payment contract or an irregular payment contract employing the true daily earnings method, a holder may assess, charge, and collect a default charge not to exceed 5% of the scheduled payment and a default charge on the past due amount computed at the maximum daily rate authorized for the contract from the due date to the date that the past due amount is paid. The default charge authorized under this subsection is in addition to the contractual time price differential charge earned on the principal balance subject to a finance charge. (e) Contract required. No default charge may be assessed, imposed, charged, or collected unless contracted for in writing by the parties. (f) Default period. A default charge may not be assessed until after the 15th day after the installment due date. For example, if the installment due date is the 1st of the month, a default charge may not be assessed until the 17th of the month. (g) Pyramiding prohibited. An authorized lender seeking to assess additional interest for default on a retail installment sales contract under Texas Finance Code, Chapter 348 must comply with the prohibition on the pyramiding of late charges set forth in the Federal Trade Commission Credit Practices Rule at 16 C.F.R. §444.4. (h) Default charge on final installment balloon payment. If the retail buyer does not exercise the option to refinance the balloon payment as permitted by Texas Finance Code, §348.123, a default charge is allowed on the balloon payment. (i) Default charge on deferred downpayment. A default charge under Texas Finance Code, §348.107 is not allowed on a deferred downpayment. |
